ODB Bank, a bank that just started its operation and is planning to declare the following dividends for the following years Year 1 - P2.00 per share ; Year 2 P2.50 per share ; Year 3 - P3.50 per share After year 3 the company is expecting that dividends will start to increase at a constant rate of 5% per year. 1. What will be the value of the company's stock if the required return is 12%?(Round off answer to two decimal places and include comma) 2. Would you recommend a buy position on ODB bank if the current stock price of the company is 38.50? (answer yes or no)

ODB Bank, a bank that just started its operation and is planning to declare the following dividends for the following years Year 1 - P2.00 per share ; Year 2 P2.50 per share ; Year 3 - P3.50 per share After year 3 the company is expecting that dividends will start to increase at a constant rate of 5% per year. 1. What will be the value of the company's stock if the required return is 12%?(Round off answer to two decimal places and include comma) 2. Would you recommend a buy position on ODB bank if the current stock price of the company is 38.50? (answer yes or no)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Cape Corp. Will pay a dividend of $2.64 next year. The company has stated that it will maintain a constant growth rate of 4.5% a year forever if you want to return of 12%, how much will you pay for the stock? What if you want a return of 8%? What does it tell you about the relationship between the required rate of return and the stock price? -If procedure and answer could be typed in computer i would appreciate it!!!
A company just paid a $1.75 dividend and expects it to grow 5% for the next 3 years. After 3 years, the dividend is expected to grow at 3% indefinitely. If the required rate of return is 9%, what is the stock's value today? a. What is the Future Value of the Dividends in Years 1, 2, 3, and 4? b. What is the Present Value of the Dividends in Years 1, 2, 3, and 4? c. What is the stock's value in Year 4 (Terminal Value)? d. What is the stock's value today?
NoRagrets, Inc is expected to pay a dividend in year 1 of $2 and a dividend in year 2 of $2.40. After year 2, dividends are expected to grow at the rate of 6% per year. An appropriate required return for the stock is 9%. The stock should be worth today. Select one: O a. $73.37 O b. $79.63 O c. $67.32 O d. $73.21
A company just paid a dividend of $1.50 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. a. If investors require a return of 8 percent on the company’s stock, what is the current price? What will the price be in three years? b. If investors require a return of 10 percent on the company’s stock, what is the current price? c. In light of your answers to part a and part b, what is the relationship between a stock’s price and the required rate of return? Please use a HP10bii+ Financial Calculator
Assume that you are given the following dividends for your company's common stock for Years 1-5. Also assume that after Year 5, dividends will then grow at a constant growth rate of 4.0 percent. Now assume that the investors require a rate of return of 17.0 percent. Given this information. determine the current price for a share of your company's stock. Year 1 2 3 4 5 O $29.75 O $30.58 $25.46 O $27.44 O $23.72 Dividend $2.40 $3.20 $3.90 $4.50 $5.00
Company A is a worldwide delivery company that is expected to generate a dividend (per share) of $1.40 one year from now (i.e. at t=1). You are expecting that on average Company A's dividends will grow at 5% each year after that into the indefinite future. Assume for simplicity that all dividends are paid at the end of each year. Suppose that the appropriate discount rate for these dividends is 10%. a. What is the current stock price for Company A? Assume that any dividend at t=0 has already been paid out. b. What do you expect the stock price of Company A to be next year (i.e. at t=1) immediately after the dividend has been paid out? c. What is the expected return for holding the stock of Company A over the year ahead? Hint: Find the IRR on the expected cash flows from buying and holding the stock for one year. The cash flows should include the purchase and sale of the stock as well as the dividend you will receive
Fey Fashions expects the following dividend pattern over the next seven years: . The company will then have a constant dividend of $2.30 forever. What is the stock's price today if an investor wants to earn a. 14%? b. 22%? Data table Data Table (Click on the following icon ☐ in order to copy its contents into a spreadsheet.) Year 1 $1.10 Year 2 $1.22 Year 3 $1.35 Year 4 $1.50 Year 5 Year 6 Year 7 $1.67 $1.85 $2.05 Print Done - ☑
CanPro Co. is expecting that its dividend for this coming year will be $1.2 a share and that all future dividends are expected to increase by 3 percent annually. What is the required return of this stock if the current market price of the stock is $17? a. 11.00% b. 9.67% c. 11.74% d. 10.06%
XYZ Florists Inc. common shares are priced at $26.43 today and are expected to pay the next annual dividend of $1.85 in one year's time. Investors have historically required an 11% return for holding XYZ stock. Assume that the dividends grow at a constant rate in perpetuity, A. calculate the growth rate implicit in today's stock price. B. calculate the capital gain in one year's time
MMC expects to pay its first dividend at the end of the year. The first dividend is expected to be $0.75 and the second $1.25. Then, dividends are expected to grow at 3.5% thereafter. Given a required return of 6.5%, what should the value of the stock be today?
Anderson Motors, Inc. has just set the company dividend policy at $0.60 per year. The company plans to be in business forever. What is the price of this stock if a. an investor wants a return of 4%? b. an investor wants a return of 7%? c. an investor wants a return of 10%? d. an investor wants a return of 11%? e. an investor wants a return of 17%?
Use Excel for this question: A company announced that it will pay a $2.00 dividend, a $2.50 dividend, and a $3.70 dividend in years 1, 2, and 3, respectively. A year 3, the dividends are expected to grow at 6% every year. What is the price of this stock today, given an 7% rate of return? O $327.23 O $342.34 O $311.46 O $389.76

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS